In addition to the gold/silver ratio indicating a fundamental undervaluation in the silver price, the gold/oil ratio gives a similar historical buy signal for gold right now.
Gold traders really needed a support from the Fed and yesterday the Federal Reserve Bank said what many wanted to hear; there is no change in their monetary policy stance. The significance of the Fed statement was in the phrase where the Fed emphasized that they are not going to deviate from their gradual rate hike path.
This particular statement pushed the dollar index lower and we saw a higher move in the gold price yesterday. However, I am a bit skeptical about this move, because I do think that the Fed is close enough to achieve their inflation target and it would put more pressure on the Fed to adopt a little more hawkish stance.
Another reason that I am bullish on gold is gold-oil ratio (the ratio of the price of gold per ounce over the price of oil per barrel) and its move towards it mean. If history repeats itself, then we are about to see some serious explosive move in gold.
Back in December 2016, it was near 20 and the subsequent move in the price pushed was from $1,127 to $1,350. The same ratio is trading at 19 now, a level not seen since June 2015. Now, again, if history comes into play (or if oil prices face a major correction), I am expecting the gold price to move all the way to $1,600 by the end of this year.
ORIGINAL SOURCE: Don't Be Afraid Of Fed, Gold Price To Touch $1,600 by Lance Roberts at Forbes on 5/1/18...